9.3 – Accounts Receivable Management

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Overview: Accounts Receivable

• Some WD programs provide non-interest-bearing repayable contributions. Accounts receivable collects repayment from clients who have entered the repayment phase of their repayable contribution with WD, or who are required to repay their contribution as a result of default or overpayment.
• WD’s focus on fueling economic growth and creating higher paying jobs include investing in businesses with great potential for innovation and growth. These businesses are at various stages of development, including expanding into global markets, seeking to commercialize new and innovative technologies, and building national/global partnerships. WD’s support for these enterprises carries a higher risk and may result in increasing WD’s repayment risk profile.
• As of March 31, 2019, WD had $150.6 million in approved repayable contributions. This includes $141.9 million under its Western Innovation Initiative (WINN) and $8.7 million under the Community Adjustment Fund (CAF). An additional $110.8 million in repayable contributions was approved in the summer of 2019 under its Business Scale-up and Productivity Program (BSP), bringing WD’s approved repayable contributions to over a quarter billion dollars.
• The repayable programs have 181 approved projects. WD has 121 projects under WINN, four under CAF, and 56 projects under BSP. Repayments under WINN and BSP will continue over the next nine years, ceasing in 2028. All CAF projects are already in repayment.

WD’s Approved Repayable Contributions

• The WINN program grows the economy through investment in innovation and technology based products, processes and services. Since the launch of WINN in 2014, WD collected $14.8 million from 62 projects. The nature of WINN investments are higher risk and WD estimates that it will collect 61%, or $86.6 million of all amounts it has invested under the program.
• CAF was launched in 2009, providing repayable assistance to small and medium-sized enterprises in and around communities that experienced significant job losses and lacked alternative employment opportunities. CAF is no longer an active program and it is estimated that $1.2 million of the $8.7 million will be collected and $7.5 million will not.
• BSP launched in 2018 and focusses investments in businesses enhancing productivity, scaling-up, and expanding their market. The investment risk is expected to be less than WINN due to the stability of the businesses participating. Given the early stages of the program, the likelihood of repayment under this program has not yet been determined.
• Table I provides an overview of expected repayable contributions from each program.

WD’s Doubtful Accounts and Write-off Procedure

• Canada’s capacity to compete in global markets depends on its ability to innovate. Access to risk capital is critical to early-stage technology companies because it enables them to develop new products, solidify new partnerships, and penetrate new markets. It is vital to their survival and growth.
• WD made strategic investments in innovation through its WINN program. The majority of WINN clients are technology start up companies with promising opportunities for growth. These clients sometimes have an unestablished market and unproven revenue generation. By their very nature, they represent a higher risk of non repayment of WD contributions. The largest portion of WD’s doubtful accounts will arise from WINN.
• Because clients in the WINN program have only just begun to repay their contributions, the amounts actually in default remain a small portion of the total amount currently in recovery. As of March 31, 2019, approximately $11 million (7%) of $152.9 million potentially due to WD had been repaid, with WINN comprising approximately $700,000 (8%) of the $8.65 million currently in default.
• WD budgets for future bad debts through the Allowance for Doubtful Accounts (AFDA). Table II shows WD’s budgeted AFDA for each program, and the resulting value of WD’s approved repayable contributions after taking into account the AFDA.

• WD’s accounts receivable management framework includes processes that govern the appropriate assessment of project financial viability, administration, payments, monitoring, collection practices, and debt write-off.
• The department takes all reasonable collection action and exhausts all possible means of collection before debts are recommended for write-off, including:
  • regular monitoring of the accounts receivable portfolio;
  • sound policy instruments on the management of accounts receivable; and,
  • legal advice from the Department of Justice on all contentious issues.
• Debt write-offs are included in the annual report of the department’s Public Accounts of Canada tabled by Treasury Board in the House of Commons in late fall.
• Where TBS approval is obtained by WD, repayable contributions can be reinvested by WD in new economic activity in the West. WD has been allowed to increase its appropriation by the amounts collected in previous years.

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